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Q3 2016: Loan to Value Ratio Update


Wealth Works Mortgage Broker Kim Gallie shares the latest LVR changes plus gives her advice on thinking outside the box when it comes to lending options...

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Quick Market Update
In July the Reserve Bank announced the requirement for all NZ lenders to comply with new Loan to Value Ratio (LVR) restrictions for Investors, effectively reducing the LVR to 60% for the purchase of an Investment Property, meaning you'd need a 40% deposit. Although the new policy takes effect from the 1st October, the RBNZ expected that banks would observe the spirit of the new restrictions in the lead-up to this which means that banks have adopted these changes already.

In addition to the Reserve Banks LVR restrictions, lenders are also introducing their own rules on top of this, which means that different banks expect different things from borrowers, when it comes to their deposit, some requiring much more than others. 

So what's changing? 

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  • Residential property investors are now required to have a 40% deposit, with the exception of only 5% of all bank lending.
  • Home buyers who will live in the property they purchase, are required to have a 20% deposit, with the exception of only 10% of all bank lending.
  • Loans already exempt from the existing LVR restrictions, for example loans to construct new dwellings and 'dollar-for-dollar refinances', will continue to be exempt.  However, as mentioned earlier, banks are introducing their own rules around this which can mean you may need more deposit.​

Thinking outside the box  

Don’t panic though! These LVR changes are directed at registered banks only. You still have other options. Wealth Works has access to a range of non-bank lenders and finance companies who aren’t affected by these changes. While their interest rates may not be the lowest in the market, many are sometimes only slightly higher. 

Please also be careful if you’re thinking about selling an investment or owner occupied property, and retaining other investment properties. The banks could demand the funds be used to reduce debt on the remaining properties as they need to fit with these new rules.  It would pay to check this out first so you know where you stand.

Do any of these changes affect you and your situation? 
Contact us today on 09 306 5820 to find out the best way to make it work for you!
Kim Gallie | kim@wealthworks.co.nz

 
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